Spend Now, Save Later: The Financial Mind of the Modern Single

Today's young singles are spending more and saving less than their married counterparts. Are they digging themselves a hole with no bottom or can a shift in the notion of how they spend, not why they spend, keep them in good financial health for the future?

A paper published in the U.S. Bureau of Labor Statistics' 2011 Consumer Expenditure Survey Anthology highlights the gap between singles and marrieds when it comes to live-now spending. According to the paper, singles ages 21 to 29 years old, without children, spend an average of $2,057 a year on restaurant meals (compared to $1,423 for marrieds of the same criteria), $660 a year on alcoholic beverages ($227 for marrieds) and $896 on clothing ($650 for marrieds).

Regarding savings, in 2010, only 49.8% of singles under 55 without kids had at least some savings, compared with 62.2% of couples without kids, according to the Federal Reserve Board's Survey of Consumer Finances.

Marty Martin, a financial psychologist at Aequus Wealth Management in Chicago and a professor in the business school at DePaul University, posits that singles "are engaged in magical thinking -- they think 'I'll start saving when I get into a committed relationship.' Singles think, 'I want to enjoy everything right now so I'm going to spend it all.'"

So as singles delay saving and keep their spending habits fast and loose, it doesn't take much work to maintain their lifestyle while laying some foundation for long-term financial health. One basic tool for singles is to know their spending methods, their advantages, disadvantages -- and how to make them work for you instead of against you. Here's a look:

Spending method: cash Works best for: Eating out and for small purchases.

It's the best way to stick to a budget: load your wallet with a certain amount, and when it's gone, you're finished shopping or eating.

"You're more aware of what you're spending," says Joe Lucey, president of Secured Retirement Advisors, a retirement planning firm in St. Louis Park, Minn. And Martin says, "If you do cash-and-carry and you're not carrying consumer debt, in the here-and-now you are engaged in financially healthy behavior."

Another advantage is that some merchants offer a discount with cash, adds Sandy Shore, spokeswoman for Freehold, N.J.-based Novadebt, a credit card counseling agency.

Cash's big disadvantage is that if it's lost or stolen, there's no recourse.

Spending method: PayPal Works best for: Buying online.

Fans of e-boutiques such as Etsy and eBay -- where numerous individuals are selling goods -- should consider paying with PayPal. Why? PayPal, which transfers money from the user's bank account or PayPal account to the receiver, is more secure than a credit card: Merchants get their money and never see your credit card digits or any of your personal information, explains Lucey.

PayPal costs buyers nothing to use (though merchants do pay a fee) and also allows buyers to pay for items in foreign currency.

Spending method: credit cards Work best for: singles who like to travel, especially if using a card that accrues rewards such as miles or hotel points, which can make travel more affordable and more comfortable.

Some rewards cards have an annual fee; the key is to make sure you're recouping that fee in airline tickets, hotel upgrades or other benefits and using the rewards before they expire.

Credit cards can also get users out of a jam, says Shore. One example: Shore's sister booked a 10-day cruise, which was cut short by five days because the cruise ship company went bankrupt. The trip insurance turned out to be useless, but the credit card company reimbursed her for half the trip.

Some credit cards also cover part of the insurance on rental cars. Such protection "is a very big reason to use a credit card if you can pay off the balance every month," she says.

Another benefit to using credit cards: They can help a young single build a credit rating, which will come in handy when it's time to apply for a mortgage or a car loan. "You never know when you'll need credit," Shore points out.

Spending method: debit cards Works best for: travel on a budget.

If you're taking a lengthy trip and want the ease and security of plastic, but not the temptation to overspend, Shore recommends setting up a checking account stocked with the vacation's budget, then using a debit card linked to that account.

Use the debit card as a credit card -- make purchases without keying in your PIN -- for an extra layer of security. Record spending so you know how far you've dipped into your vacation budget.

Spending method: don't spend, save Works best for: everyone.

No matter how they choose to pay for their indulgences, the bottom line for singles is to save at least something.

Those rules? "Stop spending money you haven't earned," Hunt says. "Don't borrow more than you can pay -- that eliminates credit card debt." Save part of everything you earn, she adds, and be willing to donate some to charity "to get balance."